Mortgage Insurance

AAA

DEFINITION of 'Mortgage Insurance'

An insurance policy that protects a mortgage lender or title holder in the event that the borrower defaults on payments, dies, or is otherwise unable to meet the contractual obligations of the mortgage. Mortgage insurance can refer to private mortgage insurance (PMI), mortgage life insurance, or mortgage title insurance. What these have in common is an obligation to make the lender or property holder whole in the event of specific cases of loss.

Private mortgage insurance may be called "lender's mortgage insurance" (LMI) if the premium on a PMI policy is paid by the lender and not the borrower. This is typically done in exchange for a higher rate or fee structure on the mortgage itself.

INVESTOPEDIA EXPLAINS 'Mortgage Insurance'

Mortgage insurance may come with a typical pay-as-you-go" premium payment, or may be capitalized into a lump sum payment at the time the mortgage is originated. For homeowners who are required to have PMI because of the 80% loan-to-value ratio rule, they can request that the insurance policy be canceled once 20% of the principal balance has been paid off.

Mortgage life insurance can be either declining-term (the payout drops as the mortgage balance drops) or level in its payout, although the latter costs more.

RELATED TERMS
  1. Private Mortgage Insurance - PMI

    A policy provided by private mortgage insurers to protect lenders ...
  2. Forced Place Insurance

    The insurance that a lien holder places on a property, to provide ...
  3. Price-to-Rent Ratio

    A mathematical calculation utilized in the Trulia Rent Vs. Buy ...
  4. Constructive Total Loss

    A constructive total loss is an insurance term where the cost ...
  5. Mutual Mortgage Insurance Fund

    A fund that insures mortgages made by the Federal Housing Administration ...
  6. Loan-To-Value Ratio - LTV Ratio

    A lending risk assessment ratio that financial institutions and ...
Related Articles
  1. Insurance Tips For Homeowners
    Insurance

    Insurance Tips For Homeowners

  2. 15 Insurance Policies You Don't Need
    Insurance

    15 Insurance Policies You Don't Need

  3. 6 Reasons To Avoid Private Mortgage ...
    Home & Auto

    6 Reasons To Avoid Private Mortgage ...

  4. Understanding The Mortgage Payment Structure
    Credit & Loans

    Understanding The Mortgage Payment Structure

Hot Definitions
  1. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center